Influences on the Organizational Implementation of Sustainability: An Integrative Model

Transcription

1 Organization Management Journal, Eastern Academy of Management All rights reserved Influences on the Organizational Implementation of Sustainability: An Integrative Model KENT FAIRFIELD, JOEL HARMON, SCOTT BEHSON INSTITUTE FOR SUSTAINABLE ENTERPRISE, FAIRLEIGH DICKINSON UNIVERSITY ABSTRACT Multiple forces in the 21 st century have propelled businesses into confronting conditions that challenge their own and the world s sustainability. This paper illuminates the factors influencing companies to implement sustainability practices. It validates an integrative model of the effects that external influences, foundational organization enablers, decision drivers, and inhibitors had on both sustainability implementation and organizational performance. Using data from a worldwide survey of 1,514 managers, we showed how external forces for sustainability and support from organizational leaders to create an enabling foundation are likely to translate into decision priorities, implementation of sustainability practices, and perceived performance improvement. We also showed the considerable power of internal inhibiting forces and outlined how they may be overcome. The results point to the steps leaders can take to achieve their environmental, social, and financial goals, as well as to further streams of inquiry.

2 2 Influences on the Organizational Implementation of Sustainability: An Integrative Model In the last decade, the issue of sustainability has become a critical issue for the world and for business (Anderson, 1998; Hawken, 2007; Prahalad & Hammond, 2002; The UN Global Compact, 2004). Global issues relating to water, food, energy, health, corruption, human rights, poverty, climate, and population threaten societal well being and thus the pillars of a healthy marketplace. While various definitions exist for corporate sustainability (sometimes also referred to as corporate social responsibility or environmental, social, and governance concerns), it may be considered as a company s ability to achieve its business goals and increase long-term shareholder value by integrating economic, environmental and social opportunities into its business strategies (Symposium on Sustainability, 2001, p.1). Mirchandani and Ikerd (2008) refer to a new paradigm of global business citizenship in which future sustainable organizations will work in cooperative structures to achieve ecological, social, and economic integrity. The extent to which organizations should proactively address societal sustainability issues continues to be debated in the management literature. In a special issue of the Academy of Management Perspectives linked to its Green Management Matters 2009 conference theme, one article essentially argued that firms should address the world s social and environmental challenges because it is the right thing to do (Marcus & Fremuth, 2009), while another argued they should do so only when it makes good strategic sense and pays off (Siegel, 2009). What is clear is that companies increasingly are being urged to shape the content of their corporate strategies to achieve greater mutuality between their own and society s strategic needs (Porter & Kramer, 2006), and many are searching for ways to achieve success on a broader and more balanced array of outcomes such as those delineated by the triple bottom line of people, planet, and profits

3 3 (Elkington, 1997; Savitz & Weber, 2006). A large practitioner-oriented literature documents the wide variety of sustainability practices being implemented by organizations, and offers compelling logical arguments and anecdotal evidence regarding the ways that such practices can strengthen competitive advantage (see, for example, Blackburn, 2007; Esty & Winston, 2006; Willard, 2002). The findings from a growing set of financial and econometric studies examining the relationship between sustainability investments and firm performance shows that such investments often improve and almost never detract from performance (Goldman and Sachs, 2007; Siegel, 2009). Much less well developed in the literature are the ways that organization can best execute sustainability strategies only a limited amount of prior empirical academic research illuminates what specific factors enable or inhibit the implementation of sustainability practices. This paper integrates complementary theoretical strands to offer a meso-theoretical model of the linkages among sustainability drivers, organizational enabling factors, inhibitors, actual practices and performance. It then tests this model using data from a worldwide survey of 1,514 managers. BACKGROUND An array of environmental, social, and economic factors challenge institutions, leaders and corporations with the reality that the world s natural resources and people are in increasing jeopardy. The climate is changing, very likely accelerated by human activity, with potentially devastating consequences on habitation and agricultural patterns, and species diversity (The United Nations Intergovernmental Panel on Climate Change, 2007). Scientists have measured vastly increased carbon dioxide levels (Hotz, 2007), shrinkage of the Polar ice cap, and degradation of topsoil and widespread desertification (Symes, 2006). Clean drinking water is increasingly becoming scarce. One estimate calculates that the earth s resources are being

4 4 depleted at a rate that is 39% faster than what the planet can regenerate (Redefining Progress, 2008). Social issues are just as troubling. More than three billion people on earth live on less than $2 a day, where access to modern energy is severely limited and education is trivial or nonexistent (Symes, 2006). The greatest future population growth will arise in the poorest areas of the world (Sachs, 2005). Even the United States confronts persistent levels of poverty and incarceration. Sustainability Practices Today, more companies see the need to move beyond traditional concerns of running a business focused only on immediate profit and have begun to deal with factors in the greater world vital to their medium- to long-term success. Reflecting the holistic and multi-dimensional nature of sustainability, a rapidly growing literature documents a wide range of specific sustainability practices being implemented by organizations (see, for example, Blackburn, 2007; Esty & Winston, 2006; Savitz & Weber, 2006; Willard, 2002, 2009). Many practices relate to improving eco-efficiency and reducing environmental footprint through energy conservation, renewable energy sources, local sourcing, and reduction of emissions, pollutants and waste. Other practices relate to creating more sustainable and effective workplaces by focusing on worker health and safety, employee engagement, work-life balance, civic volunteerism, and ethical governance, while slowly infusing sustainability criteria into talent and performance management systems. Many practices focus on sustainability-related product innovation, market development, and branding. Still others emphasize stakeholder engagement, including suppliers, investors, communities, regulators, and a wide range of activist groups. Sustainability Decision Drivers

5 5 There has been considerable research on the rationale that influences firms to invest in developing sustainability capabilities. Resource allocation decisions to support specific actions derive from a process of setting strategic priorities that shape an organization s action agenda (Weick, 1995; Porter, 1998). Thus, the extent to which an organization implements specific sustainability practices will be strongly driven by the importance it places on various sustainability issues perceived as vital to its identity and success. We can analyze the importance of these issues through the lenses of several well established theoretical perspectives. From a resource-based view of the firm (e.g., Barney, 1991), sustainability may constitute a valuable, rare (innovative), and hard to imitate resource or capability that leads to competitive advantage (Hart, 1995; McWilliams & Siegel, 2001). From the perspective of industry and competitive dynamics (e.g., Porter, 1998), benefits may accrue from advantageous effects of sustainability on market structure including degree of industry consolidation, entry barriers, rivalry dynamics, and first-mover potential (Porter &. Van der Linde, 1995). From a stakeholder view of the firm (e.g., Freeman, 1984), the potential for sustainability benefits can be understood in terms of addressing demands from customers, investors, suppliers, governmental and non-governmental organizations, and activist groups (Clarkson, 1995). Institutional theory (e.g., Scott, 1995) draws attention to the potential legitimation benefits of conformance to sustainability-oriented normative social rules and belief systems prevailing in the environment (Bansal & Clelland, 2004; Doh, Howton, Howton & Siegel, 2009; Jennings & Zanderbergen, 1995; Marquis, Glynn, & Davis, 2007). Several of these theoretical perspectives on competitive opportunities, stakeholder pressures, and ethical values informed recent studies specific to sustainability strategy. Basu & Palazzo (2008) theorized that sustainability decision-making is likely to be influenced by three

6 6 types of drivers: performance drivers, using social or environmental investments to boost performance; stakeholder drivers, meeting specific demands of external stakeholders and institutions; and motivation drivers, either extrinsic reasons such as to pre-empt legal sanctions or enhance reputation or intrinsic ones grounded in virtue ethics. This closely mirrors the empirical findings of Bansal and Roth (2000), who studied the responses of 53 firms to environmental needs and induced three drivers: competitiveness, legitimation (to burnish their credibility or avoid penalties), and social responsibility. In terms of competitive advantage, a good sustainability strategy must first be a good business strategy that fits an organization s unique value-chain opportunities and threats (Porter & Kramer, 2006; Siegel, 2009). What is distinctive about a sustainability strategy is that strategic thinking and action become more holistic, balanced and complex (Mirchindani & Ikerd, 2008). Planning takes on a more balanced short and long term view (Slawinsky & Bansal, 2009). A more diverse array of external stakeholders becomes deeply engaged so that the organization can better discover opportunities, anticipate challenges, and create mutuality (Hart & Sharma, 2004; Mirchindani & Ikerd, 2008). For instance, a large retailer such as Wal-Mart has to consider not only the design and cost of its imported merchandise but also the labor practices of its suppliers, the carbon footprint of its products, the benefit of having its brand associated with green values, and the potential for pubic relations embarrassments due to government actions or civic watchdogs (Laszlo, Sherman, & Whelan, 2005; Sachs, 2007; Scott, 2005 Stakeholder and institutional legitimation also is an important motivation for corporate sustainability, both on the upside of reputation as well as the downside of unprecedented risk. Many organizations need to beware of violating new regulations, falling into public relations embarrassments or becoming a target for activist groups. For example, Monsanto saw its multi-

7 7 billion dollar investment in developing genetically engineered foods derailed by an unexpected, highly-effective campaign among European consumer groups and farmers in developing countries that resulted in prohibitive regulations by European Union institutions -- an outcome that Hart & Sharma (2004) suggest might have been avoided if Monsanto had built bridges to these seemingly fringe stakeholders. The third driver of sustainability business decisions, social responsibility and virtue ethics, appears to operate more in conjunction with the other two drivers rather than as the sole basis for action. Very few companies in Bansal and Roth s (2000) study reported social responsibility as the only motivation. More often it was cited in connection with competitiveness or legitimation. For example, Whole Foods developing networks of local growers to supply produce to its stores aids the local economies of its own customers in a socially responsible way. Meanwhile the company publicizes its programs while reducing the cost of inbound shipping and greenhouse gas emissions from long-distance transport, potentially enhancing its legitimacy and bolstering its competitive advantage. This integration of social good with enlightened self-interest is reflected in Goldman Sachs directing investors to consider both social/environmental indicators as well as financial ones, and in academicians urging companies to focus on those societal issues instrumental to their own value chains (Porter & Kramer, 2006; Ambec & Lanoie, 2008) Sustainability and Performance A large body of evidence has accumulated from survey and case study research documenting the benefits that organizations are achieving from implementing sustainability practices (Blackburn, 2007; Esty & Winston, 2006; Willard, 2002). These can be summarized as improvements in reputation, productivity, talent acquisition, employee retention and engagement, cost effectiveness, risk avoidance/mitigation, innovation and market expansion, and access to

8 8 capital. A growing set of financial and econometric studies have examined the relationship between sustainability investments and firm performance. The findings from this literature can best be described as equivocal. On the one hand, firms specializing in sustainability metrics such as Innovest Strategic Advisors, Smith Barney, and Dow Jones (Sustainability Index) all have presented evidence that companies regarded highly for sustainability management outperform other firms and that an eco-efficiency premium is more often being built into the stock price of deserving companies (Cohen, 2006). Such performance has prompted socially responsible investment (SRI) mutual funds to attract several billions of dollars under management. Several meta-analytic reviews confirmed the connection between investment choices linked to responsible environmental and social aims and above-average returns, suggesting that firms indeed can do well by doing good (Ambec & Lanoie, 2008; Guenster, Derwall, Bauer, & Koedijk, 2005; Margolis & Walsh, 2001; Orlitsky, Schmidt, and Rynes, 2003). On the other hand, a separate meta-analysis of 127 studies did not confirm a sustainabilityperformance relationship (Margolis & Walsh, 2003). Others suggest that the key factors driving the sustainability-performance association are strategic and complex including degree of industry maturity, market structure, customer demand, institutional intermediation, and type of business strategy (Siegel, 2009). Barnett (2007) argued for a more nuanced view of socially responsible investing, particularly in regard to the need for organizations to assess and properly weight the diverse CSR demands and influence capacities of various stakeholders to predict the ROI of CSR investments. A Goldman Sachs (2007) study found no evidence of a main effect for sustainability strategies alone but did find better-than-expected returns when factoring in the interaction of sustainability with such traditional factors as industry positioning, cash flow, and the like. As the urgency of issues concerning sustainability increases, investors may well pay an

9 9 increasing premium for the shares of companies that are capitalizing on such externalities (Mackey, Mackey, & Barney, 2007). In the meantime, the best conclusion seems to be that sustainability investments often improve and almost never detract from financial performance (Siegel, 2009). Sustainability Enablers and Inhibitors Although some consultants have given advice on how to follow a sustainability strategy (e.g., Blackburn, 2007; Epstein, 2008; Willard, 2009), only a limited amount of prior empirical academic research illuminates what specific factors enable the implementation of sustainable strategies and what factors tend to inhibit it. One source of insight comes from Wirtenberg, Harmon, Russell, & Fairfield s (2007) study involving interviews with executives at nine of the world s most sustainable companies. They identified a pyramid of seven core qualities commonly associated with successfully implementing sustainability strategies and achieving triple-bottom-line results. Two of the foundation elements were top leadership support and strategic centrality of sustainability initiatives. The third was deeply-held values consistent with sustainability, such as those espousing community, citizenship, and respect for employees. This finding is congruent with other studies of how organizational values influence the way that issues are interpreted and attended to (Thomas, Shankster, & Mathieu, 1994) and the chances of issues being acted upon (Dutton, 1997). Several other studies provide support for Wirtenberg et al. s (2007) three foundational organization enablers. In her qualitative study of two organizations responses to environmental issues, Bansal (2003) found that both organizational values about environmental responses and top management support were associated with predicting sustainability-based actions. A study by

10 10 Berns and his colleagues (2009) singled out executive support and strategic centrality as keys to executing sustainability strategies. A longitudinal case study by Olsen and Boxenbaum (2009) examining the barriers that precluded implementation of a sustainability strategy reported that conflicting values and seemingly ambivalent management support greatly impaired implementation of a major sustainability project. Siegel (2009) emphasized the important role that transformational leadership plays in formulating and implementing sustainability initiatives. Wirtenberg et al (2007) and several of the other studies discussed above also noted additional key barriers to implementing sustainability practices. These included an incomplete awareness of sustainability trends and their potential organizational impacts, a lack of ideas for practices that could be implemented, a weak business case being offered for the payoffs of such sustainability investments, and insufficient metrics to track progress and create accountability. An extensive literature on organization change (e.g., Burke, 2002) shows the power of inhibiting forces to impede even those initiatives with considerable forces driving them (e.g., Lewin, 1951). Toward an Integrative Model. Figure 1 shows an integrative conceptual model of the linkages among external influences, sustainability decision drivers, foundational organization enablers, internal inhibitors, sustainability practices, and performance. We used data from a worldwide survey of managers to test hypothesized interrelationships and pathways among these sets of factors. We have not before seen an attempt to integrate disparate theoretical and empirical streams of work on sustainability management into a single investigation Insert Figure 1 approximately here

11 11 Starting from the far right of the model, we expected that more extensive use of environmentally and socially responsible sustainability practices would bring about greater performance improvement. This expectation is based on the generally positive evidence from the sustainability-performance studies cited above. Thus, the first hypothesis: Hypothesis 1: Organizations implementing sustainability practices to a greater degree will evidence better performance improvement as compared to those that are not. Based on the literature showing that organizations tend to make decisions based on the importance of issues and actions to their overall effectiveness, and the theory and growing evidence linking sustainability to competitiveness, legitimacy, and social responsibility cited above, we hypothesize the following positive relationship between decision drivers and implementation of practices: Hypothesis 2: Organizations for which sustainability issues are more important decision drivers will implement more extensive sustainability practices compared to organizations for which they are less important. Based on a large body of change-management research showing how internal inhibiting factors can diminish and even derail innovation and change efforts, and the smaller but growing literature cited above showing how lack of understanding, ideas, business logic, and metrics can impair sustainability efforts, we hypothesized the following: Hypothesis 3: Internal inhibitors will have a negative effect on the implementation of sustainability practices, directly plus indirectly by weakening decision drivers. From a resource-based perspective, the studies cited above identifying cultural values, top management support, and strategic centrality as foundational organization enablers for implementing sustainability strategies led us to hypothesize the following:

12 12 Hypothesis 4: Stronger foundational enablers will positively affect the implementation of sustainability practices, directly plus indirectly by strengthening decision drivers and diminishing internal inhibitors. The variety of theories regarding the diverse external influences of stakeholders, institutions, and industry competitive structure on organization strategy leads us to expect strong but varying effects (depending, for example, on whether particular regulations may be relaxed or become more stringent, or whether demands by particular stakeholders may increase or decrease). Such impacts could include altering the salience of sustainability issues in decision making, the degree of top management support for sustainability, the strength of internal inhibiting forces, and thus the degree of sustainability practices implemented. Specifically, we hypothesized: Hypothesis 5: External influences will affect the degree to which organizations implement sustainability practices through their positive or negative effects on foundational organization enablers, decision drivers, and internal inhibitors. METHODS For our analyses, we used data from a worldwide survey designed for this study and conducted in 2007 by the American Management Association (AMA), with the assistance of the Human Resource Institute (HRI) and the Institute for Sustainable Enterprise (ISE) at Fairleigh Dickinson University. The survey asked respondents about the degree to which their organizations were implementing sustainability practices; the factors driving, enabling and inhibiting organizational sustainability; and the amount of performance improvement experienced over the previous five years. Participants

13 13 The target survey population consisted of AMA s international list of executives, managers, supervisors, and individual contributors across a wide range of functions; the HRI e- mail list of primarily high-level human resource professionals; and HR.com s list of members. A link to an online survey was ed to the target population by region during February In total, 1,524 usable surveys were submitted, with all respondents answering all questions, as the survey did not allow for partial responses (given the self-selection nature of the on-line survey process, it was not possible to calculate response rates). Respondents came from 44 countries. Over 60% (683) were based in the US, while the remaining 435 respondents were based in six other geographic regions, including Asia-Pacific (119), Western Europe (103), Canada (75), Africa-Middle East (53), Latin America (52), and Eastern Europe (33).. In terms of respondent characteristics, approximately 75% were at or above the managerial level. Just over 53% of respondents were female. Although respondents represented a broad variety of functions, just over 50% came from human resource-related areas due to the heavy participation in the survey by HRI and HR.com members. Nevertheless, preliminary Analysis of Variance showed that the ratings of HR respondents on study measures were not meaningfully different from those of non-hr respondents (all Fs < 4.0, p>.01; set at this level so as not to magnify trivial differences due to our large sample sizes), with one exception not surprisingly, HR practitioners saw workforce issues as a stronger sustainability motivating factor than did those from outside the HR domain (means of 3.75 and 3.57, respectively, F 20.6, p<.01) Many respondents organizations were either global or multinational in their scope of operations (29% and 26%, respectively), while 45% were national organizations. Virtually every economic sector was represented and there was a relatively even split between smaller, medium,

14 14 and large-sized organizations about one-third had revenues of below $50 million and about 39% had fewer than 500 employees, while about one-third had over 5,000 employees and over a billion dollars in revenue. Survey Measures All survey questions used five-point, Likert-type scales, with a 1 rating generally designated as not at all and a 5 rating as, depending on the question, to a very great extent or extremely important. The survey s construction was guided by a review of the same body of literature cited above. Questions were grouped on the survey in separate sections organized by perceptions of sustainability practices, performance improvement, decision drivers, organization implementation enablers, and implementation inhibitors. We also used as separate measures responses to two overall questions: 1) To what extent do you believe that your organization is implementing a sustainability strategy?, and 2) To what extent is your organization seeing measurable benefits from sustainability initiatives? Descriptive statistics and correlations are shown in Table Insert Table 1 approximately here To establish the reliability and validity of our scales and measures, we randomly split the overall sample into two groups: a pilot test sample consisting of a random sample of one-quarter of respondents (n = 396), and a study sample consisting of the remaining three-quarters of the overall sample (n = 1118). This was done so as to avoid validating and testing newly constructed scales using the same sample, which could lead to capitalization on chance and inflated correlations (Stevens, 2001). We first used the pilot sample to perform an exploratory factor analysis using Principle Components Analysis (PCA) with Promax (oblique) rotation on the items

15 15 in each section of the survey (excluding the two overall questions noted above). We then grouped items together based on their factor loadings, performed scale diagnostics, and created a single scale score by simply averaging the responses to the items for each grouping. Next, we applied this factor structure to the second study sample and performed confirmatory factor analyses and scale analyses. We subsequently tested for systematic differences between the pilot sample and the larger sample and did not find any meaningful differences. The analyses reported in the methods and results sections are based on only the second sample of 1,118 respondents. More specific details for each measure follow. Perceived Performance Improvement was assessed via responses to the question How would you rate (1=much worse, 5=much better) the following compared to the last five years, a) your revenue growth, b) your profitability, c) your market share, d) your customer satisfaction. These four items loaded on a single factor. Table 2 lists these four items along with their means, standard deviations, and factor loadings. Consequently, we grouped them to produce a single scale, which exhibited a Cronbach s alpha estimate of reliability of Insert Table 2 approximately here Sustainability Practices were assessed via responses to the multi-part question: On a scale from 1-5, to what extent does your company have practices in place to do the following? PCA analysis showed that the items under this umbrella question fell into three factors (explaining 72.2% of the variance in the response pattern). Table 3 shows the individual items along with their means, standard deviations, and factor loadings. We averaged the items under each factor to

16 16 produce three five-point scale scores: Practices 1- Integration/Alignment (α =.94), Practices 2- Eco-Efficiency (α =.88), and Practices 3 - Employee-Centered/Ethics (α =.79) Insert Table 3 approximately here Decision Drivers were assessed via responses to the multi-part question: On a scale of 1-5, to what extent does each of the following items drive key business decisions for your company today? PCA analysis showed that the items under this umbrella question fell into four factors (explaining 70.1% of the variance in the response pattern). Table 4 shows the individual items along with their means, standard deviations, and factor loadings. We averaged the items under each factor to produce four five-point scales scores: Drivers 1- Environmental/Operational Issues (α =.93), Drivers 2- External Stakeholder/Marketplace Issues (α =.90), Drivers 3- Workplace Issues (α =.75), and Drivers 4- Reputation/Innovation/Compliance Issues (α =.68) Insert Table 4 approximately here Internal Inhibitors were assessed via responses to the multi-part question: to what degree does each of the following issues hinder your company from moving toward sustainability? PCA analysis showed that the items under this umbrella question fell into one factor (explaining 61.1% of the variance in the response pattern). Table 5 shows the individual items along with their means, standard deviations, and factor loadings. We averaged the items under this factor to produce a single five-point scale score (α =.84)

17 17 Insert Table 5 approximately here Foundational Organization Enablers were assessed via responses to the umbrella question On a scale of 1-5, to what extent does your company have the following qualities for building a sustainable enterprise: a), top management support, b) centrality to business strategy, and c) deeply ingrained sustainability values. These three items loaded on a single factor (explaining 77.5% of the variance in response pattern). Table 6 lists these three items along with their means, standard deviations, and factor loadings. We averaged the three items to produce a single fivepoint scale score (α =.90) Insert Table 6 approximately here We also explored two types of External Influences that would be expected to undermine an organization s desire to otherwise pursue a sustainability strategy.. The stem for this survey section was to what degree does each of the following hinder your company from moving toward sustainability? For completeness, the survey could have also queried the external issues that positively influenced more sustainability management, but this was not done. PCA analysis showed that four items fell into one factor (explaining 55.1% of variance in the response pattern), called Lack of External Stakeholder Demands. This factor appeared to capture external aspects consistent with the stakeholder view of the firm. These were the items that probed for lack of demand for sustainability actions from the community, suppliers, consumers and customers, and shareholders and investors (all negatively scored). Table 7 shows the individual items along with their means, standard deviations, and factor loadings. We averaged the four items to produce a

18 18 single five-point scale score (α =.90). A second independent factor emerged based on responses to the item, Fear of competitors taking advantage of us, labeled Competitive Disadvantage (also negatively scored). This factor appears to capture an external aspect of rivalry dynamics consistent with theories of industry structure Insert Table 7 approximately here ANALYSIS Preliminary data analysis was conducted using the SPSS 15.0 software package. Our expectations relating to the linkages among the constructs in our conceptual model of external influences, foundational organization enablers, decisional drivers, internal inhibitors, sustainability practices, and performance were tested using the AMOS 5.0 software package for structural equation modeling (SEM). Using SEM over traditional regression techniques for these analyses has three advantages: (1) SEM allowed us to correct for measurement error (by assessing and adjusting for the relative reliability of the various indicators of each of the latent variables or constructs), resulting in more accurate statistical tests than could have been performed with traditional regression techniques; (2) SEM allowed us to simultaneously calculate both direct and indirect effects of study variables; and (3) SEM automatically provided us with statistical tests of the adequacy of our hypothesized model compared with alternative good-fitting models (see, for example, Byrne, 2001, and Schumaker and Lomax, 1996). RESULTS

19 19 Table 1 shows the correlations between the measures used in this study. Respondents organizations appeared to be implementing sustainability to only a moderate extent, both overall (mean 3.01) and in terms of the three specific areas of sustainability practices we measured (means of 2.83, 2.95, and 3.67). The strongest achievement evidenced was in regard to employeecentered and ethics practices. Also, organizations were seen as having only moderate levels of foundational organization enablers. Sizable gaps existed between the extent to which the organizations were reported to have enabling qualities (means for underlying values, top management support, and strategic centrality ranging from 3.1 to 3.3, Table 5), compared to the much higher perceived importance of these qualities for executing a sustainable strategy (not shown in detail here), which ranged from means of about 3.9 to 4.4. In terms of overall implementation of sustainability, larger firms reported higher levels, as shown through ANOVA comparing three revenue categories --less than $50M, $50M to $1B, greater than $1B (F = 15.12, p <.001). Test of Conceptual Model The results of the SEM analyses are shown in Figure 2. As can be seen, the results provide support for our hypotheses that: (a) sustainability practices are positively associated with firm performance improvement, (b) the drivers of sustainability decision-making are positively associated with implementing sustainability practices, (c) internal inhibitors are negatively associated with both decision drivers and sustainability practices, (d) companies foundational enablers are associated positively with decision drivers and negatively with internal inhibitors, and (e) external influences in this case two negative factors outside the organization -- are associated negatively with enablers and drivers, and positively with internal inhibitors

20 20 Insert Figure 2 approximately here Hypothesis 1: Sustainability Practices are positively linked with Perceived Performance Improvement (β =.24, p <.05). A total of 5.8% of the variance in perceived performance improvement is accounted for by the predictors in the model. As can be seen in Table 2, the strongest area of perceived improvement was revenue growth. Table 3 shows that organizations were rated strongest in practices for employee health and safety, ethical accountability, supporting work-life balance, involving employees in decisions affecting them, and providing training and development on sustainability practices. The least implemented practices concerned linking sustainability to compensation, reducing greenhouse gas emissions, and establishing sustainability metrics. Hypothesis 2: Sustainability Decision Drivers are directly associated with sustainability Practices (β =.70, p <.05), accounting for 48.6% of the variance in implementation. Not surprisingly, organizations in which decision making was reported to be more strongly influenced by sustainability concerns tend to be seen as implementing sustainability practices to a greater degree. The four factors defining the Drivers construct (Table 4) had similar construct loadings. Thus, environmental/operational concerns; reputational, innovation and compliance concerns; workplace issues; and external stakeholder and marketplace issues are all relevant for predicting sustainability practices. Hypothesis 3: The reported weak competencies, organizational systems, business logic and ideas captured in sustainability Inhibitors are directly negatively associated with sustainability Practices, (β = -.24, p <.05). In addition, Inhibitors are also indirectly linked with sustainability Practices through their negative effects on sustainability Drivers (β = -.28, p<.05). Thus, the total